Federal Reserve officials signal cautious path for rate cuts amid still-high inflation

We have historical precedence for high inflation and high interest rates in the U.S. economy, but never with the current combination of government debt, money supply, quantitative tightening, demographics, inflation and interest rates. Since the Fed’s rate cut, many policymakers have given speeches and interviews, with some clearly supporting further rapid cuts and others taking a more cautious approach. One-year CDs are now averaging 1.76% but top-yielding CD rates pay more than 4.5%, according to Bankrate, nearly as good as a high-yield savings account. Trump has said he’ll bring down mortgage rates — even though 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy. Trump’s victory even spurred a rise in the U.S. 10-year Treasury yield, sending mortgage rates higher. “As Americans seek a reprieve from the relentless pressures on their wallets, even a modest federal rate cut would be seen as a positive step in the right direction,” Caldwell said.

The second way interest rates impact utility companies is by increasing their borrowing costs. Of course, an interest-rate hike affects all businesses this way, but it’s an especially important factor for utility companies because of their typically high debt levels. Major utility firms have major capital expenditures and high debt-to-market cap levels. The construction of power plants and the maintenance of the vast infrastructure required to deliver gas, water, or electricity makes utilities a very expensive business that requires major debt financing. A cut could also help address challenges in the housing market—decreasing the cost of borrowing could help increase construction and make it easier to take out mortgages.

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• Interest rates on savings accounts are fairly responsive to changes in the federal funds rate.
• Hiring has slowed to an average of just 116,000 jobs a month in the past three month, about half its pace a year ago.
• Consumer spending, which makes up 70% of economic activity, has been surprisingly resilient despite high interest rates and inflation.
• The Federal Reserve lowered its key interest rate by a hefty half percentage point Wednesday, moving ahead with its first rate cut in four years and cheering markets that expected an emphatic move amid a softening jobs picture.
• In addition, though we strive to make our listings as current as possible, check with the individual providers for the latest information.
• So annual percentage yields on deposit products such as CDs, savings and interest-bearing checking accounts will decline as well.

The National Association of Realtor’s pending home sales index rose 2% in October from the previous month, its third straight monthly increase, the trade group said Wednesday. Initial jobless claims dropped in mid-November to 217,000, below last week’s 221,000 and the lowest since May 2024. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.

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And a traditional CD will protect you from major and unexpected rates-down movement from the Fed. Where you miss out is that unanticipated scenario in which the Fed fights inflation with rates once again. In hindsight, depositors’ best interest in 2023 was to lock in a CD at 5.50 percent APY – purely from the perspective of maintaining a high rate. What can depositors learn from repricing in 2024, and how can they apply it to their best interest now? Housing affordability has been a major issue due in part to a sharp rise in mortgage rates since the pandemic. Since the central bank last met, the personal consumption expenditures price index — the Fed’s preferred inflation gauge — showed a rise of just 2.1% year over year.

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The Federal Reserve Beaxy delivered its first interest rate cut since 2020 Wednesday—and that has far-reaching effects on your wallet. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period. It seems a lifetime ago, but the last time the Federal Reserve cut interest rates was in March 2020, at the dawn of the COVID-19 pandemic. P. Morgan, leans toward a half-point cut because “downside employment risks are growing, and upside inflation risks are ebbing.” But “we don’t have full confidence that the (Fed) committee agrees just yet,” he said. But eventually, those pandemic-induced distortions waned as the health crisis improved. And there were so many job openings – a record 12 million in March 2022 – that the labor market was able to rebalance itself.

Although high interest rates were meant to discourage borrowing and spending and subdue inflation, they have also slowed the economy and hurt the labor market. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board’s Commercial Paper Web page (/releases/cp/).

Fed Chair Powell says the US economy is in ‘solid shape’ with gradual rate cuts coming

Ultimately, though, it’s your own money habits that are the main factor in determining your financial future. As the Federal Reserve interest rate is a short-term rate, changes in it have a stronger impact on short-term lending products. They also tend to have a bigger impact on products with variable, rather than fixed, interest rates. When the Federal Reserve interest rate is high, banks are discouraged from borrowing from each other, and the supply of cash in the economy decreases.

However, because interest rates on credit cards are relatively high, these changes — for example, your APR going from 17.25% to 17.50% — are often unnoticeable. The Federal Reserve sets the target rate as a range, giving it the flexibility needed to achieve its goals. The chart below shows how the upper limit of the federal funds target rate has changed over time. The Fed had previously signaled that three rate cuts could be coming this year. The central bank has one more opportunity to cut rates again in December. In September the Consumer Price Index, which measures changes in the cost of consumer review financial intelligence, revised edition goods and services, rose 2.4% on an annual basis.

“Mortgage rates generally will move as expectations change related to data from the job market, inflation, GDP growth and more,” Goodwin says. “If the U.S. economy and job market remain strong, expect mortgage rates to move very slowly.” Kathy Bostjancic, chief economist at Nationwide, said she expects the Fed will cut its key rate by a quarter-point next month, to about 4.3%. But officials will “likely pause” early next year “to assess prospective policy changes under the second Trump administration as well as the current landscape of economic activity and inflation,” she added in a client note. Mortgage rates slid to just above 6% in September following the Federal Reserve’s decision to cut its main interest rate for the first time in more than four years. While the central bank doesn’t set mortgage rates, its actions and the trajectory of inflation influence the moves in the 10-year Treasury yield.

Ultimately, the Federal lexatrade review Reserve interest rate is an important tool for maintaining a stable economy.

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The federal funds rate has fluctuated significantly over time, reflecting changing economic conditions and policy approaches. While 25 basis point adjustments are standard, the Fed may opt for more significant changes (such as 50 basis points or more) if it believes more dramatic action is needed to influence economic conditions. Later in the press conference, Powell noted that he doesn’t see any red flags signaling an economic downturn. “I don’t see anything in the economy right now that suggests that the likelihood of a downturn is elevated — you see growth at a solid rate, you see inflation coming down and a labor market that is still at very solid levels,” he added. When the Federal Reserve interest rate is low, there’s more cash in circulation and banks are able to borrow from each other more freely. In turn, it becomes easier and more affordable for both consumers and businesses to borrow money, which boosts consumer spending and encourages businesses to expand, hire more workers, and increase wages.